Related person

This query is : Resolved

vikas narang (Querist)
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13 August 2011 A1. is a firm consisting of three partners SN, KN & US
B2 is a Pvt. Ltd. Company in which SN.KN & US are directors and their shareholding in B2 is 60%, Rest of the directors are relatives of SN, KN & US and also balance shareholders are also relatives of SN,KN & US
Accordingly A1. and B2 are interconnected undertaking and as per excise are related person

A1. is selling material to B2 which is used by B2 for captive consumption and the selling price of A1 is cost of production + 7% and as per valuation rules
“If goods are supplied to related person for captive consumption, valuation will be on basis of cost of production plus 10%.”

Now the question is :
•What should be done to avoid the relation of interconnected undertakings between the two

•If SN, KN and US resign from B2. & also reduce their shareholding to below 50% in that case whether A1. & B2 still will be interconnected undertaking or not.

Madhukar N Hiregange

Madhukar N Hiregange (Expert)
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16 August 2011 Under CE 2 companies are said tobe related where they have mutuality of interest in each other. You may like to read a commentary on CE or only valuation under CE to get this clarified fully.